FAST FIVE: Trump's Feud With China Is A Carbon Copy Of Reagan's Trade War With Japan: Is A New Plaza Accord Imminent?
Targeted US trade actions have failed to significantly reduce the US trade imbalance with this nation As the US trade deficit with this country has continued to grow, so has bipartisan political pressure to do something about it.
At the end of Reagan's first term (December 1984), US Trade Representative Bill Brock wrote that “it is not unreasonable to ask if we have wasted four years.” Brock said that, given the political climate, it was “vital” that Japan committed to double imports from the US and cut the bilateral trade deficit in half, or he feared things were approaching a “flash point.” By late summer 1985, those predictions looked prescient.
As Goldman recalls, the US Congress had drafted over 200 pieces of trade-related legislation, including a prominent one that would have required Japan to reduce its trade surplus or face a 25% tariff on all exports (sound familiar?).
Is another Plaza accord in the cards.
In the late 1980s, Dollar depreciation coincided with a fading fiscal boost and more accommodative monetary policy that was directionally consistent with the political aim of boosting exports.